AUDJPY has been surging since testing the 90 level on August 5th. Today’s RBA minutes supported the currency pair despite the strong stance of the JPY yesterday. The RBA signaled that the cash rate is likely to remain at 4.35% for some time to bring inflation back to the target range. The RBA noted that underlying inflation remains persistent and that the risk of inflation not returning to the target range within a reasonable timeframe has increased. The hawkish rhetoric could support a comeback for the AUD against the JPY, even as the central banks are expected to move in opposite directions over the next year. 

(AUDJPY Daily Chart) 

AUDJPY tends to make extreme moves during periods of significant change. During the 2020 COVID shock, the pair fell sharply to 60, with a huge spike. After a period of recovery, an uptrend began to form in the third quarter of 2020. The rate hikes from Australia and substantial bond-buying by Japan supported this trend. Then, in July, despite the markets were expecting an FX intervention, the pair surged to 110, breaking above the upper line of the trend channel. However, the countermove was strong, leading to a 20-yen drop within about a month, down to 90. This decline was also extreme, creating a significant downward spike below the lower line of the trend channel.  

Now, after both sides of the channel have been tested aggressively, AUDJPY is attempting to recover and find its direction. The 99.10 level is a key resistance, currently being tested for the fourth day in a row. If a breakout occurs, AUDJPY could push above 100 and stabilize. However, as long as this resistance holds, the likelihood of forming a downtrend that eventually tests the current green trend channel will increase.